Can Online Piracy Be Stopped?

A massive new effort to crack down on intellectual property theft spans industries and every point of the content creation and distribution chain. It's called "Copyright Alert System" and it aims to stop people pirating from pirating content online, by very simply preventing them from surfing the web.

There's no question piracy is a major issue that costs the economy $16 billion in lost earnings and $3 billion in tax revenues. But will this time be different? Can piracy really be stopped?

It's a broad coalition of the Hollywood studios (Disney , News Corp, Sony, Viacom and Time Warner), the music business, a range of entertainment industry trade groups, plus the companies that enable access to content—AT&T, Verizon, Comcast, Time Warner Cable and Cablevision.

Here's how it will work: contractors will monitor use of illegal file-sharing services, and when they find someone sharing a copyrighted file, they warn the users Internet Service Provider (ISP). Then the ISPs have agreed to issue up to six warnings, before reducing Internet speed or even suspending service if the piracy continues.

After receiving five or six warnings users will hit a landing page, requiring them to contact their ISP or respond to educational materials. This is a gradual process in which users can request an "independent review" of their online activity before their Internet access is restricted.

Will companies really pull the plug on their paying customers' service? Comcast has said it doesn't plan to cut service, and other ISPs haven't yet weighed in. Europe has a similar, though stricter policy.

France and other countries have a "three-strikes policy" to block Internet access of users who repeatedly violate copyright protections. But here in the U.S., there are not yet any laws enforcing this—it's a voluntary adoption of 'best practices.'

The success or failure of this anti-piracy effort all hinges on the true cooperation of content creators and internet providers—the content creators and distributors. For the first time "the pipes" and content owners are one and the same at Comcast since its acquisition of a majority stake in NBC Universal.

Though interests are aligned at Comcast and NBC Uni, CNBC's parent company, there are plenty of inherent differences between these contingents, as we saw when the Recording industry sued Verizon back in 2002 for refusing to disclose info about copyright violators.

But luckily for the content creators, the "pipes" are gaining more and more incentives to block piracy on the Internet they offer. Why? Cable and telecom companies don't just sell Internet access, they also sell TV access. And if consumers forgo TV to pirate content online, they will no longer pay for TV access through Time Warner Cable or Verizon's FIOS offering.

But this is a long way from a silver bullet. We're still just talking about warnings, and alliances—not laws mandating that copyright violators have their access pulled. The Senate Judiciary Committee approved the "Protect IP" act to block foreign piracy sites.

Is a three strikes rule next? Not if Internet-rights groups have anything to say about it. But in the meantime the media giants will hope this makes a dent in the problem, and they'll work on all the *paid* alternatives to piracy to make it easier to access their content legally.